A high level People's Republic of China mission is about to sign up this country's petroleum industry giants to search for oil in the South China Sea, according to the Chinese and U.S. sources.
Officials of the visiting Chinese delegation, headed by Peking's top energy official, Vice Premier Kang Shien, said negotiations are under way with nine of the largest U.S. based oil firms for seismis surveys in Chinese waters.
Chinese and American sources said agreements are likely to be concluded and announced with several of the firms, possibly most of them, before the delegation leaves June 12.
A senoir Chinese official called the survey agreements "a preliminary phase" of Peking's ambitious oil development. While he would give no details, it was clear that the contracts will fall short of drilling and production deals, which some of the oil firms were hoping to obtain.
Nevertheless, large-scale U.S. involvement in surveying is considered likely to lead to major U.S. involvement in the exploitation of resources that are found. Together with other new proposals in the development of hydroelectric power and coal mining, the impending petroleum agreements represent a major step in Sino-American relations.
The Chinese mission, which left Washington yesterday for a tour of U.S. corporate offices, offshore drilling rigs, hydroelectric dams and coal mines in eight states, was received at the White House Tuesday by President Carter.
In an effort to make certain that the oil deals do not encounter bureau-cratic difficulty and delay, the White House is taking an active role in preparing the way or government approval of the use of highly sophisticated U.S. seismic equipment and computers in Chinese waters.
In March, Atlantic Richfiedl Co. and Santa Fe Industries announced an agreement for seismic studies off the Chinese coast. Three Atlantic Richfield survey ships arrived in the area two weeks ago to begin the work, a company spokesman said yesterday.
The present negotiations are expected to lead to similar arrangements with other firms. Among those now negotiating with the Chinese, according to U.S. sources, are Amoco, Exxon, Pennzoil, Phillips, Mobil, Texaco and Union Oil.
As a gesture to China, Atlantic Richfield spent $540,000 in February for public television sponsorship of the Kennedy Center gala for Chinese Vice Premier Deng Xiaoping (Teng Hsiao-ping). In March, Mobil spent $100,000 to subsidize the tour of China by the Boston Symphony Orchestra.
The oil search area assigned to the American firms by Peking authorities is reported to be northeast of Hainan Island in the South China Sea. The seabed is so deep there that only the major oil firms have the advanced technology for effective exploration and drilling.
While Chinese officials and American oilmen are tight-lipped about the arrangements under discussion, all agree that the seismic studies will be undertaken by the oil companies in designated areas at their own expense.
At least some of the firms expect to pool their results, which will be made available to the Chinese. The next step, in one to two years, probably will be for drilling and development of areas with a high potential for production, according to industry sources.
China currently produces about 2 million barrels of oil per day, but is considered by many to have the potential of becoming one of the world's largest oil producers. French and British concerns are undertaking offshore oil surveys in the Yellow Sea, and the Japanese firms, with some U.S. help, reportedly have agreed on oil exploration of Po Hai Bay farther north.
With many undeveloped rivers and also considered to have the largest undeveloped hydroelectric resources in the world.
The Chinese mission met this week with hig-level officials of the Army Corps of Engineers and the Bureau of Reclamation, and the United States had proposed that up to 80 Chinese hydroelectric engineers be sent to this country at Chinese expense to those two agencies, the Tennessee Valley Authority and the Bonneville Power Administration.
The Chinese delegation is also holding discussions with major U.S. coal mining firms about contracts for development of strip-mining and other coal operations on the mainland, sources said. China is the world's third largest coal producer, and its reserves are reported to the United States and the Soviet Union.